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Asia Fires Warning Shots Over IMF Chief

Marwaan Macan-Markar

BANGKOK, Jun 2 2011 (IPS) - Even if French Finance Minister Christine Lagarde secures the top post at the International Monetary Fund (IMF), the rumblings across Asia convey the message that the international lender’s clubby custom of picking a European national to be its managing director smacks of discrimination.

A just concluded international conference on the “Future of Asia” in Tokyo became a platform for a leading figure of a 10-member regional bloc to drive home an unequivocal point: it is time for an Asian national to head the Washington D.C.-based Fund.

“It does not matter if we win or lose. At least we are going to make a statement and then next time around they will not take it as the monopoly of Europe,” argued Surin Pitsuwan, the secretary-general of the Association of Southeast Asian Nations (ASEAN), during a speech at the conference in the Japanese capital. “It is important that we stake a claim to the position that lies vacant. Europe, you cannot have the position forever.”

Surin’s verbal salvo has been matched in other international gatherings in the region, such as last week’s 67th ministerial sessions of the Economic and Social Commission for Asia and the Pacific (ESCAP), a Bangkok-based U.N. body. Teymur Suleymanov, a minister from natural gas-rich Kazakhstan, called for the dismantling of the system at the IMF that had always favoured a European leader.

“If the U.N. is fighting to end discrimination against women and minorities, why should this system exist, which is also a form of discrimination?” he asked, echoing sentiments shared by some of the other government officials from Asia’s emerging economies who were attending the annual sessions in the Thai capital.

And it is not just in conference halls that such a challenge to the IMF’s conventional pecking order is being mounted. Commentators in the region’s press have entered the fold, listing possible Asian candidates with sound credentials to succeed Dominque Strauss-Khan, the French national who headed the Fund till his downfall last month following charges of sexual assault on a maid in a ritzy New York hotel.

The influential Hong Kong-based daily South China Morning Post has made the case for Thai Finance Minister Korn Chatikavanij, while others have pointed to Singapore Deputy Prime Minister Tharman Shanmugaratnam, former Turkish economy minister Kemal Dervis, Indian economist and former IMF executive Montek Singh Ahluwalia, and Min Zhu, a special adviser to the IMF and former deputy governor of the Bank of China.

This Asian challenge is a further reminder of the confidence sweeping across the region as the world’s economic centre of gravity moves eastward, a shift also amplified at the IMF, where Asia’s contribution is now over 40 percent.

The continent’s economy continues to win accolades for helping the world come out of the 2008-2009 financial crisis. “The dynamism of the Asia-Pacific region was a major factor driving the global economic recovery in 2010, with the developing economies of Asia and the Pacific increasing their rate of growth in gross domestic product from 4.7 percent in 2009 to an impressive 8.8 percent,” reveals an ESCAP report released in April.

“The economic case for appointing a new IMF head from Asia is compelling,” said Pradumna Rana, associate professor at the S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University. “As Asia continues charging ahead, the West is likely to remain stuck in a jobless recovery for some time.”

“The IMF is at a critical juncture,” he added during an interview. “If the nearly 70-year-old tradition continues and IMF governance is not reformed, then the goodwill that the IMF has gained in emerging markets, including Asia in the past several years, will be lost and we will be back to the post-Asian financial crisis days where many emerging markets wanted to avoid the IMF.”

The immediate aftermath of the 1997 Asian financial crisis, which began in Thailand and rapidly spread across East Asia, saw the IMF’s power on full display, as its managers flexed their financial muscle to force countries like Thailand, Indonesia, South Korea and the Philippines to implement harsh economic measures.

But the IMF’s prescriptions saw these economies contract as much as 13 percent, pushing millions out of jobs and into poverty. These policies, aimed to save foreign banks and also push a privatisation agenda, triggered an anti-IMF backlash across the region.

In the years since, countries in Southeast Asia and the northeastern nations of China and South Korea have explored alternative regional financial mechanisms. They include a 120 billion dollar currency swap facility, which was established in December 2009, and the push to establish an Asian Monetary Fund.

“Thailand and other Asian countries that were in the same boat during the 1997-1998 crisis resent the IMF then and now,” said Thitinan Pongsudhirak, director of the Institute of Security and International Studies at Bangkok’s Chulalongkorn University. “Fiscal tightening was mandated for East Asia then but deficit-spending is encouraged for the U.S. and Europe in their current slump. Such double standards ring loud and clear for discerning Asians.”

It is a sentiment that has shaped the views among government officials and think tanks to “advocate for an Asian to head the IMF,” he told IPS. “If the West insists on governing an outdated global governance infrastructure from the Cold War, the 21st century will see the rise and ire of the rest. The IMF is just one manifestation.”

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